Low-income earners fortify life insurer

OLD Mutual received a healthy boost from extending its offering to low-income earners, with the life insurer reporting a 60% surge in profits at its Mass Foundation business unit.

Old Mutual Emerging Markets CEO Ralph Mupita said yesterday that one of the core drivers behind Mass Foundation’s performance in Old Mutual’s results for the six months to June was that more clients were staying on.

Mass Foundation is a unit of Old Mutual Emerging Markets.

Another factor was the purchase of a larger stake in Old Mutual Finance, which now accounts for 27% of Mass Foundation’s life sales.

“We’ll be able to grow the contribution of the life sales coming through the business,” said Mr Mupita.

It has also seen growth from the provision of home loans to the low-income “gap market” — individuals who do not qualify for government-subsidised housing but earn too little for bank loans.

Mr Mupita said his company had spoken to the National Housing Finance Corporation about developing a product to fill that space, and a R1.3bn deal was announced last month.

Old Mutual launched a Housing Impact Fund in 2010, which financed the construction of lowcost homes, adding to its boutique of alternative investments focusing on development.

Old Mutual said group profits rose 20% to £904m in the half year to end-June. Banker Nedbank and life assurance, investment and lending provider Old Mutual Emerging Markets were the largest contributors, with £404m and £333m in profits, respectively.

The group’s share price rose 3.85% to close at R45.33.

Earlier this week, Nedbank reported headline earnings of R5.3bn for the same six-month period, up 15.7%.

Old Mutual Emerging Markets increased profits by 16% on a constant currency basis, boosted in part by 60% growth in the Mass Foundation business, 296% growth in the property and casualty business, and operations in the rest of Africa.

Yesterday, Reuters reported Shore Capital analyst Eamonn Flanagan as saying the results were better than the market had expected, but it was not enough to flag a “buy” call to clients.

“We await evidence of any success the group has in developing its holistic wealth platform in the UK before turning more bullish on the stock,” he wrote in a note. With Reuters